Federal Reserve rate expectations flipped dramatically today as traders abandoned hopes for aggressive easing. Fed officials are signaling increasing concern about 3% inflation rates, with Chicago Fed President Goolsbee stating that stalling "at 3% is not good enough" and "not what we promised."

The market now prices a 40¢ chance of rates above 4% by January 2027, up from just 3¢ yesterday. Even more striking is the April 2027 outlook, where traders are pricing 59¢ odds of rates staying above 2.5% — a 41¢ jump suggesting markets are bracing for potential rate hikes rather than cuts.

Recent Fed minutes warned that "rate hikes [are] possible if inflation stays above 2% target," marking a dramatic shift from the rate-cutting expectations that dominated late 2025. The repricing reflects growing concern that sticky inflation may force the Fed to tighten rather than ease policy.